We have for sometime been considering what steps could be taken to
improve the British Commonwealth position in the occupation of
Japan and have come to the conclusion that there would be great
advantage for all Commonwealth countries if arrangements could be
made for the inclusion of the port and district of Kobe into the
area at present under B.C.O.F. occupation.

2. From the military point of view you are aware of the
disadvantages at which the military administration has been placed
through the lack of any large centre which could provide
recreational and other facilities for the occupation troops,
comparable to those enjoyed by the United States forces. The
relatively inferior position of the Commonwealth Force in these
respects has also not been without its effect on Commonwealth
prestige. If, in addition, the proposal to allocate to Chinese
occupation forces the area around Nagoya should materialise, the
fact that the Chinese were in control of an area provided with
more adequate facilities and of greater economic importance than
that controlled by the British Commonwealth could, in our opinion,
not fail to detract further from the Commonwealth's prestige in
the Far East.

3. There is the further consideration that the presence of the
Commonwealth Occupation Forces in one of the two areas of major
economic and social consequence in Japan should not be without its
effect in the establishment of better understanding between our
countries and Japan in the future. Conversely, confinement to the
present area of occupation, which is of only secondary importance
in the economic, social and political life of the country, not
only deprives the influential sections of the Japanese public of
the advantages of our impact upon them but must inevitably tend to
make them underrate or overlook our value as a factor in
developments in the Far East.

4. It is, of course, clearly realised that considerations of
prestige must be subordinate to the overriding question of the
availability of manpower, and it was the latter consideration
which compelled us to withdraw the United Kingdom Brigade. [1] In
September last, that is before the proposal to withdraw the
Brigade was announced, General Robertson was reported to consider
that without increasing B.C.O.F. strength he would be in a
position to take over Kobe, Osaka and Kyoto; and in December last
the British Element on JCOSA reported that in their view, the
possibility of including Kobe would remain provided that the total
reduction in B.C.O.F. strength did not exceed 3,500 troops. We
appreciate that this view must be subject to confirmation by
General Robertson and that his views must be conclusive.

5. Subject to this confirmation we consider that both as regards
prestige vis-a-vis the other occupying forces and the Far Eastern
peoples generally and as regards administrative convenience for
the B.C.O.F. authorities, the inclusion of Kobe into the area is a
step to be desired and encouraged.

6. Since the military occupation of Japan is intended to come to
an end after a limited, though as yet indefinite period, the
considerations outlined above are, with the exception of the
question of prestige, matters of short term importance only. The
economic aspect, on the other hand, is one which will have a
direct relation to the trade of all Commonwealth countries with
Japan for many years to come. The Kobe-Osaka area was before the
war the centre of British Commonwealth commercial interests in
Japan and as far as one is able to foresee the area is likely to
regain, in relation to the total volume of trade with Japan which
develops in the post-war period, the same ascendancy as it
maintained in the pre-war years. Since British Commonwealth trade
with Japan must be seaborne the importance of establishing a firm
footing as early as possible in a seaport such as Kobe will be
readily apparent. The present indications that private trade with
Japan may soon gradually be renewed make it all the more desirable
that steps be taken without delay to secure an advantageous
position for all British Commonwealth trading concerns and to
provide for them at one of the major Japanese seaports the
shipping, insurance, banking and other facilities on which they
must rely.

7. We should, therefore, hope that this proposal will be
considered not merely as a matter of short term military
convenience, but as one of long term economic interest to all
those members of the Commonwealth (and not least to Australia and
New Zealand) with special economic interests in the Pacific.

8. We should be glad to learn your views. If proposal meets with
your general approval we assume that it would be for Australian
Government to undertake negotiations with United States
authorities. If it is agreed that proposal should be pursued and
if General Robertson gives a favourable report on manpower
situation we suggest that financial aspects should be considered
by JCOSA.